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The Lower Churchill hydro project has passed the environmental review process, clearing another hurdle to the Labrador power generation plant becoming a reality.

In its response to the review panel’s report, Ottawa says the benefits of the project outweigh potential risks.

"The government of Canada has determined that the expected significant energy, economic, socio-economic and environmental benefits outweigh the ‘significant adverse environmental effects’ of the project that have been identified in the panel report," federal officials stated.

"This decision is an important step toward realizing the full potential of one of North America’s most ambitious renewable energy projects," Penashue said in a statement.

"It will deliver countless economic benefits to our already flourishing province, to Nova Scotia, and to the rest of Canada."

The province released the project from further environmental review, with a number of conditions.

"Today’s release from the environmental assessment process represents another important milestone and a major step forward as we move towards our decision on final project sanction of Muskrat Falls," Natural Resources Minister Jerome Kennedy said in a news release.

Both levels of government will now move forward with issuing the permits necessary for the project to proceed.

'Inadequate' analysis

The review panel recommended a new, independent analysis based on economic, energy and environmental considerations.

That new analysis recommended by the panel would take into consideration domestic energy demand projections, as well as alternate energy sources, such as using offshore gas as a fuel for the Holyrood thermal generating facility.

But the two levels of government rejected that panel recommendation.

The federal government said it carried out its own economic analysis of the project — one that backed the Lower Churchill option.